The Modernization of Oil and Gas Reporting, which was released on December 31, 2008 by the SEC, updates the full cost accounting and reserve reporting rules for public oil and gas companies. The new reporting standards are intended to provide investors with more meaningful and comparable information to help them evaluate the value of oil and gas companies.
One of the new requirements is the use of a 12-month average price in estimating reserves and for full cost accounting purposes, except where prices are defined by contractual agreement. The average is calculated as the unweighted average of the price on the first day of each month within the 12-month reporting period.
Other changes relate to the definitions of proved, developed, and undeveloped reserves, as well as the disclosure of probable and possible reserves, as defined.
Public companies must adopt the new reporting requirements for fiscal years ending on or after December 31, 2009. For private companies, the SEC has stated its intention to coordinate with the FASB align their accounting standards with the new public company rules. As a result, early adoption is not permitted to allow time for the FASB to make the appropriate revisions.Categories: Accounting Practices, Controller's Corner, Financial Reporting